Container Transport Services

3 Main Causes of Supply Chain Disruption in 2021

Categories: Freight Forwarder.

After eighteen months of severe disruption, things are returning to something that resembles normal in many parts of the United States.

Many cities in the US are seeing promising decreases in COVID-19 cases as more people get vaccinated. Because of this, people are resuming more of their pre-pandemic activities, causing rapid and unpredictable shifts in consumption. However, the international supply chain still hasn’t fully recovered from the pandemic. Serious supply chain disruptions and shortages have been in the headlines again and, in some industries, supply can’t keep up with demand.

While countless factors are contributing to these challenges, three of the biggest issues are factory shutdowns, labor shortages, and container shortages. Here’s how each one is playing out in the supply chain right now.

Factory shutdowns

The modern supply chain relies on a symbiotic network of producers to create goods, transport them, and distribute them to end users. When a silicon chip producer or raw material supplier gets shut down due to COVID surges or factories experience shutdowns, it can disrupt the entire system in a serious way.

Similarly, microeconomic conditions elsewhere can lead to slowdowns in production that hit businesses stateside, as is the case with power rationing in China. These unexpected circumstances are causing materials shortages and bottlenecks throughout the global supply chain.

Labor shortages

Foodservice and retail aren’t the only industries experiencing labor shortages — manufacturers are also struggling, often for many of the same reasons.

There’s a very delicate cultural balance to be struck in the US today. Some manufacturers are concerned that vaccine mandates will cause a percentage of their workers to quit. At the same time, others are facing worker shortages due to the lingering effects of local COVID hotspots, including workers who aren’t willing to put their health at risk.

Equally important is the fact that a lot of semi-skilled or unskilled workers stepped away from their previous jobs in the past year and a half, and many of them just aren’t coming back. Available workers are demanding a higher premium than they traditionally would — to the tune of $3 to $4 more than pre-COVID. This presents an added challenge for employers already having a tough time sourcing skilled technicians to handle essential roles.

Additionally, the truck driver shortage — which was also an issue pre-pandemic — continues to affect companies’ ability to get their products from the port to the warehouse to the consumer. It doesn’t help that many schools were shuttered for a year, meaning fewer newly trained drivers are available to replace retirees. Carriers and last-mile providers will need to realign their employment strategies, logistics technology support, and resource allocation to compensate for this new reality.

Container shortages

High demand and bottlenecks commonly lead to high prices for commodity goods. For the past year, that has been the case for housing, fuel oil and propane, and shipping capacity. When the commodity in question — shipping containers — is used to handle imports for many other raw materials and goods, that spells trouble for the wider economy.

The average market rates for shipping containers have skyrocketed since mid-2020. As a result, companies are forced to compromise on shipping times in order to secure a container at all.

Port bottlenecks are further delaying the delivery of goods and materials, disrupting the entire supply chain and compounding the container shortage. In the short term, that puts pressure on companies that rely on fast fulfillment of cheap goods, such as “fast fashion” style e-commerce brands. Many are turning to stateside 3PL warehouses to expand and expedite the fulfillment of goods they can’t be sure will arrive on time to meet demand otherwise.

Conclusion

Experts believe that many of these supply chain issues will continue into 2022. That means more headaches and more challenges for the people tasked with keeping goods flowing and society running smoothly. However, as a silver lining, all this widespread disruption is sparking conversations about how to increase supply chain flexibility and resilience. Companies that come out on the other side of the pandemic will be smarter, leaner, and more tech-savvy.

Partnerships will be necessary for success in this unconventional logistics ecosystem. A 3PL partner like Globecon at a major port can help to fill gaps that create bottlenecks in the supply chain, from drayage to freight forwarding to portside warehousing and beyond. As multimodal infrastructure trends change to meet new demands, it helps to have an expert on your side.

Shore up your portside fulfillment operations at the Port of LA and Long Beach. Contact us!